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Transformation of Local Financing Companies: Approaches and Policy Options


By Zhou Jianqi, Zhang Yongwei, & Li Zhineng, Research Team on “State-owned enterprise reform: problems and countermeasures”, Institute for Enterprise Research, DRC Research Report No.190, 2015 (Total 4875) 2015-12-11


Local financing companies are a key type of local state-owned enterprises. Some are successfully transformed and become supportive force for urban development while others are facing difficulties for further performance. The transformation for these financing companies is critical yet complicated. Under the new normal, those companies with adequate reform can re-position their functions according to actual circumstances. Approaches to transformation include the following approaches: to participate as common enterprises in projects related to the improvement of people’s livelihood, develop local public resources through various channels, manage non-for-profit state-owned assets, make investment in for-profit state-owned assets with the major role of capital management, and create favorable conditions for the all-around development of local economy. After transformation, the financing companies could continue to bring into play their carrier function for city development while bearing relevant responsibilities for the management of state-owned assets. The government should provide supporting policies including: establish a market-based supportive mechanism for non-for-profit projects, improve the PPP (Public-Private-Partnerships) financing mode with focus on standardized regulation and fair sharing of economic benefits, set up regulated enterprise management based on market order, and carry out regulation based on separate lines of work.

Key words: local financing companies, re-position, policy options